The pension fund giant wants to hire six investment firms with a history of embracing environmental, social and governance (ESG) goals
A major pension fund, the California State Teachers’ Retirement System (CalSTRS), which oversees a portfolio of $193.2 billion, is giving its very public blessings to investment strategies that embrace environmental, social and governance (ESG) goals with the news that it wants to hire six public equity investment management firms with “ESG expertise.”
Candidates will have until Oct. 28, 5PM Pacific Time to post solicitations on the Cal eProcure website http://bit.ly/2ehnrlS , say CalSTRS officials. The website is an online portal “designed to improve the experience of businesses selling products and services to the state of California,” according to the website, which replaces the BidSync bidding and contracting resources service.
The ESG approach has been gaining in popularity among investment firms as key groups such as millennials want their investment dollars to support more socially and environmentally responsible companies. The hope is that companies that pass the ESG test will have better bottom lines and returns over time because they have fewer scandals, more sustainable business plans, and have earned better public reputations and positive branding.
“We are looking for managers with very well-established capabilities to integrate ESG considerations into every aspect of the investment decision-making process,” says CalSTRS Chief Investment Officer Christopher J. Ailman, in a prepared statement. “Our preferred managers will have a successful track record of ESG considerations in areas such as security analysis, portfolio modeling and investment analytics, and will demonstrate an ability to generate excess market returns over the long-term.”
The preferred candidates for the ESG manager spots will have a successful track record of ESG considerations, CalSTRS officials say.
CalSTRS officials have specified the following qualifications for candidates:
- Be a registered investment advisor, bank, insurance company or trust company;
- Have been running an ESG or corporate governance-focused public equity trading strategy for at least two years;
- Currently have at least $100 million in managed assets in an ESG or corporate governance-focused public equity strategy;
- Currently have at least $225 million in total assets under management;
- Currently have fund information in the U.S. ESG or non-U.S. ESG universe within the eVestment database.
The firms that are ultimately selected “will supplement CalSTRS’ two existing firms,” which have been with CalSTRS since 2007, officials say. The half-dozen new firms will need to work with Generation Investment Management LLP with $622 million in CalSTRS assets under management (AUM) as of June 30, 2016; and AGF Investments America, Inc. with $256 million in CalSTRS AUM as of June 30, 2016.
CalSTRS officials expect to make their selections by mid-2017. More details about requirements and timelines are at the CalSTRS Business Partnership Opportunities webpage.
CalSTRS describes itself as “the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans,” according to officials.
The pension fund also provides disability and survivor benefits, officials say. The fund was set up to serve 896,000 public school educators and their families from California’s 1,700 school districts, county offices of education and community college districts.
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